Continuing pressure will be exerted to further reduce the defense budget in the years to come. This, combined with the change in threat noted above, results in the paucity of new program starts (in 1997). Thus, the issue may be, how to make the best of this?
1.6.3 Paucity of New Program Starts
Clearly the Department of Defense is pursuing fewer major system development programs and has been provided with significantly reduced R&D and procurement funds as compared with the recent past. In fact, the real value of defense spending has declined in each of the last 11 years since 1986 — through the last three years of the Reagan administration, through Desert Storm and the Bush administration, and now through the Clinton administration. This trend began before the fall of the Berlin Wall and has spanned two Republican and one Democrat administration. 7
The former Under Secretary of Defense (Acquisition & Technology) Paul Kaminski was promoting three points in this regard: the continuation of a movement from separate defense and commercial industrial sectors to one integrated industrial base, furthering defense industry restructuring and consolidation, and expanding the opportunities for armaments cooperation and using that cooperation to better integrate and rationalize our industries. He also gave emphasis to increasing DoD reliance on dual-use technologies, products, and processes.
Today's global economy allows everyone, including potential adversaries, to gain increasing access to the same commercial technology base. This increased access is further justification for DoD to pursue a dual-use strategy in order to break down the barriers between commercial and defense industries, to realize the benefits of commercial-military integration in both research and development and in manufacturing, to increase the pace of innovation in defense systems, and to reduce the cost of such systems. The bottom line is that we have no choice but to move from separate industrial sectors and marry the momentum of a vigorous, productive, and competitive commercial industrial infrastructure with the unique technologies and systems integration capabilities provided by our defense contractors.
The world-wide defense industry is dealing with excess capacity. Mergers and combinations of companies are taking place in the United States. For many countries in Europe, aerospace firms with long and distinguished histories have been privatized, merged, or even closed. Industrial base considerations are becoming more important to our national and international security postures. In the interest of caution, DoD has conducted assessments of some sectors of the U.S. defense industry to determine what capabilities are essential to support our defense needs; whether or not those capabilities are truly unique; and whether or not those capabilities are "endangered." In 1996, the department completed studies of the industry supporting conventional ammunition and tracked combat vehicles, bombers, helicopters, destroyers, nuclear power plants for submarines, expendable space launch vehicles, the D-5 missile, and torpedoes. These studies indicate that although DoD programs will not sufficiently sustain all of the companies currently engaged in defense-related businesses, the scale and mix of the DoD programs will adequately sustain nearly every required industrial capability. The two conclusions are that there are virtually no sectors where the capability is endangered; and DoD should not take direct action to preserve those capabilities.8
As previously noted, on both sides of the Atlantic defense industrial sectors are downsizing. The United States still has perhaps another 10 -percent reduction ahead, and DoD will continue to face pressures to reduce its budget. DoD is dealing with this environment of fewer new program starts and all of the implications of this reduction, including the implementation of a dual-use strategy and a broad program of acquisition reform to better integrate the defense and commercial industrial base.9
7 Defense Issues, Vol. 11, Nr. 85, "Defense Industry Challenges and Opportunities," prepared remarks by USD ( A& T) Paul G. Kaminski to the Silicon Valley/ Space Consortium 2nd Annual Silicon Valley Defense Acquisition Conference, Santa Clara, Calif., July 11, 1996.
8 Defense Issues, Vol 11, Nr 84, Paul Kaminski, USD( A& T), Warsaw, Poland, June 21, 1996